When I first visited Croatia in 2004, the country was expecting to be accepted into the EU by 2006. Then the date was pushed to 2009. Now it seems imminent but anti-climactic. Romania and Bulgaria managed to jump ahead of Croatia, entering the EU in January 2007. They were considered more important politically.
Back in 2004, when EU entry was anticipated for 2006, the country's real estate market (which is priced in euro) saw big activity and big gains. Of course, it was a different world back then. This was coincidentally also the height of the global real estate boom. Everyone in Western Europe was interested in investment in Croatia...including me. We bought a shell of a stone farmhouse built in the early 1800s. It's still waiting to be renovated. We last visited it about a year ago, and I was very happy to find, when we did, that my enthusiasm both for Croatia and for the spot where we decided to buy (on the side of a mountain in Istria) were as great as ever. This is a place where I can imagine settling in happily and long term.
Croatia still has many challenges to address, including reducing corruption and lowering its unemployment rate, which sits around 20%. But the potential is there, a lot of it, both for tourism and as a retirement destination.
As in all markets worldwide, real estate values in Croatia have fallen since the 2006/2007 highs. However, as the mortgage market in this country was very limited, it hasn't experienced anything like the collapses that Ireland and Spain have been suffering through. Tourism is the shining star of the economy and continues to expand. Bottom line, I expect real estate prices to remain steady, especially in the key tourist destinations. Buying a small apartment or house to put up for short-term rental might net you a reasonable 5% to 6% return.
Thinking longer term, this country, once it has finally entered in to the EU, likely will have to streamline its residency permit process, which right now isn't easy to navigate. This will help the country to develop as a retirement option, especially among the Brits and West Europeans, who are always in the market for coastal sunshine. This is one asset Croatia has in abundance. Indeed, anyone looking for a sunny, mild coastal destination would do well to consider this country, which is very competitive in terms of both pricing and amenities on offer. With a long coastline and more than a thousand islands to explore, it's a boaters' playground.
If you had to choose among the distressed countries of southern Europe--Spain, Greece, Italy, Portugal, and Croatia--for a place to park some money in real estate, I'd say that Croatia offers the best short-term yield potential and long-term upside. Focus on the tourist regions.
Lief SimonContinue Reading:
Image source: Adriatic beach 1 by Vladimir Fofanov
Further, in addition to purchase price, you have to consider holding costs when making comparisons. One big factor is property taxes. In Europe, generally speaking, property taxes are much lower as a percentage of property value than they are in the United States.
In Paris, property owners pay two taxes (one is a property tax, the other is an occupancy tax). For my apartment in this city, the total of the two is about .2% of the property value. I pay no property tax for my house in Croatia…not because it's worthless, but because Croatia doesn't charge property tax. Ireland doesn't charge property tax either, at the moment, for residential property. The country is expected to implement one by 2014, but the rate will be low as a percentage of value.
The cost in Europe comes when you make the purchase. Most countries charge a transfer fee from 1% up to 12%. You could consider this an upfront property tax if that makes it easier to bear. Amortize it over the time you expect to own the property, and you'll likely still find the cost works out less than paying the comparable number of years of U.S. property tax.
You're not going to find really inexpensive property in Europe's marquee cities (Paris, Barcelona, Rome, etc.), but this part of the world has a long history and long coastlines. Take out a map and look for small towns near bigger base cities. In these kinds of places you can buy super-cheap and be near enough to a brand-name city to enjoy all it has to offer on a regular basis.
Istria is one of my favorite choices in Europe. The history, the architecture, and the countryside all are enchanting. This region of Croatia has many historic towns, inland and along the coast. I'd say the most interesting is Porec, with its walled old town. For a bigger town, Pula is really the only option, and here you'd find it difficult to find a house for sale for US$100,000 or less. Not so in Porec. The downside for Croatia is that full-time retirement living is difficult, as the country doesn't offer an easy residency visa option.
On the Black Sea coast, consider the region around Constanta. Winters here can be a bit colder than on the Mediterranean, but summer temperatures are perfect unless you're looking for really hot. This region of Romania offers good new construction at really low prices (well under US$100,000), making it a good choice if living in a building built before the United States was a country bothers you.
If neither of these options makes sense to you, again, take out a map. You'll be surprised how many interesting options for an affordable retirement you can find in the Old World.
Lief SimonContinue Reading:
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Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With more than 25 years experience covering this beat, Kathleen reports daily on current opportunities for living, retiring, and investing overseas in her free e-letter.
Her book, How To Retire Overseas—Everything You Need To Know To Live Well Abroad For Less, was recently released by Penguin Books.
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